Driving the Australian Economy off a Cliff
By Tarric Brooker with Independent Australia
A huge number of Australians will be plunged into poverty overnight as others get to renovate their homes — courtesy of Australian Government programs. Tarric Brooker reports. Prime Minister Scott Morrison has begun pulling back stimulus measures, despite the coronavirus outbreak still wreaking havoc across the globe.
AS THE coronavirus economic crisis continues to unfold, millions of Australians face the prospect of joining the 1.6 million people already on Centrelink benefits when JobKeeper concludes in September.
To add insult to injury, the Morrison Government’s JobSeeker $550 per fortnight supplemental payment also concludes at the end of September. This will potentially leave millions of people far under the poverty line in an instant, during the worst economic crisis to hit our nation since the Great Depression.
Whether the Government is choosing this course of action due to a genuine belief that the economy will “snap back” to normal – despite warnings from the Reserve Bank and economists that it won’t – or simply due to the ideological priorities of the Coalition’s leadership, it doesn’t really matter, the end result is the same.
A huge number of Australians will be plunged into poverty overnight.
Want a home reno done?
Meanwhile, the Morrison Government has confirmed it will be offering cash grants to homeowners to renovate their homes, in order to boost the construction sector.
However, builders seem to feel quite differently. In an interview on Monday with 3AW, president of the Builders Collective of Australia Phil Dwyer said he “can’t imagine why” the Government would introduce such a scheme.
Mr Dwyer told 3AW, the building sector is as busy as ever:
"At the moment I think it’s a little bit busier than usual! There’s a heap of renovations in every suburb in this town. I can’t imagine why we would need cash injections to help us. We’re just going to overheat the industry. I don’t think it’s needed.”
Mr Dwyer’s view is supported by the data from the Australian Bureau of Statistics, which shows that spending on residential renovation work was within nine per cent of all-time record highs during the December quarter of 2019 (the latest available data).
AS THE Morrison Government resumes its push for a return to a "balanced budget", despite the coronavirus outbreak still wreaking havoc across the globe, we are reminded of an old episode of The Simpsons.
In the episode, the Simpson's home town of Springfield is hit by a hurricane, during which Homer unwittingly leaves the shelter to go outside during the eye of the storm, believing the worst was already over, despite repeated warnings from his daughter Lisa, until the storm comes back and he is almost blown away by the wind.
Australia now arguably finds itself in a similar position to Springfield. Our economy is in the eerie calm of the eye of the storm, as JobKeeper, government stimulus programs and mortgage deferrals cushion the blow of the crisis.
Unfortunately, these months of relative calm have seemingly had the same effect on the Morrison Government as they did on Homer Simpson. Prime Minister Scott Morrison has recently confirmed that his Government were pressing ahead on balancing the budget and returning it to surplus, despite the fact that the number of new global coronavirus cases is hitting record highs and China is showing a worrying trend toward a second wave.
Economists have been warning the Morrison Government of the threat of a “fiscal cliff” in September/October as more $12 billion-a-month in stimulus measures expire.
The Morrison Government, however, is seemingly not only paying little heed to these warnings but also potentially removing stimulus measures early — as evidenced by childcare workers having their JobKeeper support payments cut off in July.
What does the data say?
Despite the growing sense of positivity about the economy from the Morrison Government, most economic indicators continue to remain extremely poor.
This month’s jobless data from the Australian Bureau of Statistics (ABS) has the headline unemployment rate at 7.1 per cent. However, the true rate of unemployment is likely far higher once Australians who have left the workforce are factored into the numbers.
When these workers who were in the labour force back in March are factored in, the true jobless rate is more likely around 11.5 per cent.
Source: ABS
The Australian Industry Group’s construction and services indexes are both at record lows, despite the pace of contraction in the respective sectors slowing slightly.
It’s like our nation has transited to some sort of weird parallel universe, where helping over a million unemployed Australians get back on their feet is unfunded empathy, but handing out large amounts of money for homeowners to renovate their properties is “superior economic management”.
Prime Minister Scott Morrison likes to say that “the best form of welfare is a job" but the number of jobs on offer has collapsed and economists are warning of the economy and labour market heading “off a cliff” when JobKeeper and mortgage holidays conclude. Yet the Government continues to be hell-bent on pursuing its ideological agenda.
The world has changed; the Coalition hasn’t
The reality is, the world has changed and even nations such as South Korea – which were hit with the pandemic early and dealt with it extremely well – are now struggling. Economic forecasts around the globe continue to be downgraded and unemployment predictions revised upwards.
Even with the global economy in recession and despite the United States literally burning under the strain of current events, the Coalition continues to insist that somehow the economy will quickly "snap back" once COVID-19 restrictions are lifted.
As our nation heads into this dark and uncertain future, it's concerning to think that the Morrison Government may continue to pursue its ideological agenda, regardless of the reality being experienced by everyday Australians.
Within the Coalition party room, there has long been discontent about JobKeeper, JobSeeker and other stimulus measures, with some MPs including Barnaby Joyce and Jason Falinski calling for an earlier than scheduled end.
In the coming months, the ongoing lifting of coronavirus containment measures and likely improving retail sales – due to billions of dollars a week in stimulus measures – are going to create a mirage of a much stronger economy than we actually have, even as other key indicators continue to flash warning signs.
Hopefully, the Morrison Government doesn’t make the same mistake as Homer Simpson in the hurricane, thinking that the crisis is over prematurely. Because if they do, we may all end paying the price for their overconfidence.
Key economic indicators don’t support the Morrison government’s optimism that it’s time to begin removing support measures and returning to their usual focus on attaining a surplus.
Australia now finds itself between a rock and a hard place. On one hand, the economic crisis beyond our borders has seemingly only just begun and is likely to continue for the foreseeable future. On the other, the Morrison Government appears reticent to engage in further large-scale stimulus measures in the coming months, just as the warning of a “fiscal cliff” is predicted.
This piece is a combination of two articles first published by Independent Australia and republished here with their kind permission.
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